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Cyprus

Cyprus’ financing resumed, praise from Merkel (Update 2: new tranche next month)

Dutch Finance Minister and Eurogroup chairman Jeroen Dijsselbloem (left) talks to Finance Minister Harris Georgiades

The Eurogroup, meeting in Luxembourg on Thursday, has decided to resume financing Cyprus as part of a €10bn bailout programme agreed in 2013.

The European Stability Mechanism (ESM) confirmed that it would be disbursing €100m in July.

Klaus Regling, Managing Director of the ESM, told a news conference in Luxembourg that to date Cyprus has received €5.7bn out of the total aid package of €8.9bn.

Cyprus’ economic adjustment programme ends in March 2016, Regling said.

Local media reported that the International Monetary Fund’s (IMF) contribution to the same tranche will amount to €170m.

The IMF’s Executive Board is expected to consider approving the combined fifth, sixth and seventh reviews of the Cyprus programme during its June 19 meeting, according to remarks made last week by IMF spokesman Gerry Rice.

Cyprus’ international lenders had put the reviews on hold for several months while the island’s parliament dragged its feet on new laws governing foreclosures and bankruptcies.

In a written statement, Finance Minister Harris Georgiades said the Eurogroup confirmed that the Cyprus economy is on a track to recovery and growth.

The Eurogroup has noted the fiscal consolidation achieved by the Cypriot government as well as the stabilisation of the financial system in Cyprus, the statement read.

“At the same time, the positive review [of the economic adjustment programme] and the decision to continue the financing paves the way for activating the quantitative easing programme in a way that bolsters our country’s economy.

“At this time, it is clear that the reform drive needs to press forward unabated, the goal being to create a competitive economy, absent the distortions of the past,” Georgiades said.

Local media reported that the next aid tranche amounts to €270m, of which €100m from the European Stability Mechanism (ESM) and the €170m from the International Monetary Fund (IMF).

The IMF’s Executive Board is expected to consider approving the combined fifth, sixth and seventh reviews of the Cyprus programme during its June 19 meeting, according to remarks made last week by IMF spokesman Gerry Rice.

Cyprus’ international lenders had put the reviews on hold for several months while the island’s parliament dragged its feet on new laws governing foreclosures and bankruptcies.

In a statement issued late on Thursday the Eurogroup said it welcomed the institutions’ conclusion following the sixth review mission that Cyprus’ adjustment programme had been brought back on track.

“The fiscal performance continues to be solid, the debt outlook has improved, and structural reforms are progressing in several areas. We note with satisfaction the signs that confidence is strengthening, the economy is emerging out of recession, and the stabilistion in the labour market, although unemployment remains high,” it said.

Meanwhile, in a speech in the German parliament on Thursday, German Chancellor Angela Merkel praised Cyprus for effecting deep reforms in return for aid.

 

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